In Kazakhstan, a ban to be introduced on calculating remuneration for delays of more than 90 days on consumer loans of individuals — Madina Abylkassymova

Tuesday, 17 March 2020, 13:41:55

At the Government session chaired by Prime Minister Askar Mamin, measures to support entrepreneurship and domestic production were considered.

Chair of the Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market Madina Abylkasymova reported on temporary measures of prudential regulation in connection with the introduction of a state of emergency and changes in the world financial markets and preventing the growth of the debt burden of the population and business.

In the framework of the implementation of the President Kassym-Jomart Tokayev’s instructions given at the meeting of the operational working group on March 13, 2020, to mitigate the impact of the state of emergency, the Agency of the Republic of Kazakhstan on Regulation and Development of the Financial Market, together with the National Bank of Kazakhstan, developed a set of measures to ensure the stability of the financial system and protect the rights of consumers of financial services.

According to Abylkassymova, the first measure is aimed at the stability of the financial system.

“At present, the situation in the financial system of Kazakhstan is stable. At a consolidated level, second-tier banks have a significant reserve of equity and liquidity to ensure continuous operations and provide a full range of banking services. There are no risks for bank depositors. According to the results of an independent assessment of asset quality, the excess of capital adequacy k1 relative to the regulatory minimum is 70%, subject to adjustments. The Agency is conducting stress testing of the banking system at the system level and individually for banks to determine banks' resilience to potential shocks in the commodity and financial markets,” the financial regulator informed.

So, until March 30, 2020, bank corrective action plans will be adopted based on the results of an independent assessment of asset quality. At the same time, taking into account the changed economic conditions, the introduction of a number of regulatory measures will be postponed for banks until Oct. 1, 2020, which will tighten the approach to calculating provisions.

“From April 1 to Oct. 1, 2020, temporary prudential regulation measures will be taken to prevent a decrease in the level of lending to Kazakhstani businesses. These regulatory measures are counter-cyclical in nature and are aimed at reducing pressure on banks' capital and liquidity,” Abylkassymova said.

To this end, the Agency will expand the list of hard collateral when financing projects under state programs to support business, public-private partnerships and introduce a lower risk-weighting on loans to SMEs, PPPs and syndicated loans. Additionally, deferred payment of a loan due to the imposition of a state of emergency will not require impairment or provision for regulatory requirements.

The application of these standards will allow additional release of equity in the amount of 168 billion tenge for lending to the economy.

“To preserve liquidity and maintain stable funding of banks, the list of assets recognized as highly liquid will be expanded. Also, to reduce the currency risks of banks, the limit on the long foreign exchange position and the limit on the net foreign exchange position will be reduced. For subjects of the stock and insurance markets, risk-weighting ratios will also be reduced. Corresponding amendments to the legislative acts have been prepared and will be put into effect on March 30, 2020,” Abylkassymova explained.

At the same time, in the framework of the implementation of the order of the President Tokayev, given at an expanded meeting of the Government on Jan. 4, 2020, to prevent excessive growth of unsecured consumer loans, during the state of emergency and later on at the legislative level, a ban will be introduced on the calculation of remuneration for delays of more than 90 days for all unsecured consumer loans of individuals.

“In order to restore the credit history of individuals, an opportunity will be provided for the borrower to correct a negative credit history in case of repayment of more than 50% of overdue debts within 12 months and subsequent fulfillment of obligations,” Abylkassymova said.

The Agency, together with second-tier banks and other entities of the credit market, as well as the ALE Association of Financiers of Kazakhstan, is invited to take the following measures.

“First, in accordance with Article 359 of the Civil Code of the Republic of Kazakhstan, a borrower who has not fulfilled a loan obligation shall not be liable in the event of force majeure circumstances, that is, extraordinary and unavoidable circumstances, such as natural disasters, military operations, etc. Such circumstances include the introduction of a state of emergency,” she said.

In this regard, fines and (or) penalties (forfeit) for late payments on loans and (or) microcredits to individuals and legal entities arising from the introduction of a state of emergency should not be charged on loans and microloans. This rule will apply to loans issued to individuals and legal entities not only by banks, but also by all microfinance organizations, including pawnshops and credit partnerships, as well as other lenders providing loans.

Second, in accordance with paragraph 3 of Article 34 of the Law of the Republic of Kazakhstan “On Banks and Banking Activities in the Republic of Kazakhstan” and paragraph 6 of Article 3 of the Law of the Republic of Kazakhstan “On Microfinance Activities,” lenders are entitled to amend the terms of the loan agreement unilaterally if they improve for the borrower.

“In this regard, banks and microfinance organizations need to work to provide deferred payments, including principal and remuneration, for up to 90 days to individual entrepreneurs and small and medium-sized businesses in which the financial situation worsened due to the state of emergency," added Abylkassymova.

In addition, banks and other subjects of the credit market will determine the procedure and mechanisms for interacting with borrowers to implement these measures, as far as possible in a remote form for the convenience of the population and business.

The Agency, together with the Government, is developing measures to support lending to the economy as part of government programs – the Economy of Simple Things and the Business Roadmap 2020. The Agency will continue enhanced monitoring of the situation in the financial market and will ensure control over the implementation of these measures.